Lynas Rare Earths (ASX:LYC): The best of the bunch in a sector bound for better times

Lynas Rare Earths (ASX:LYC) is in our view the best company in the rare earths sector. You may not realise as high a return than if you invested in an explorer or developer that had success…but his company is virtually the only producer in the rare earths space on the ASX. Perhaps we are only saying something Blind Freddy could, because shares are up 160% this year.

What are the Best ASX Stocks to invest in?

Check our buy/sell tips

Who is Lynas Rare Earths (ASX:LYC)?

Lynas is the world’s largest producer of rare earth materials outside China. The Lynas Advanced Material Plant—the company’s primary processing plant in Kuantan, Malaysia—is also the world’s largest rare earth extraction facility outside the Middle Kingdom.

The accolades don’t stop there. Lynas’ premier project at Mount Weld in WA comprises two elements; the mineral deposit there itself and a concentration plant nearby. The Mount Weld Central Lanthanide Deposit is rated as one of the highest grade rare earth deposits in the world. Mount Weld’s average head grade—the average grade of ore fed into a mill— is 14.8% compared to around 8% in Bantou, China—one of the world’s most critical processing facilities for global rare earths supply.

The Mineral Resource was last updated in mid-2024 and the mineral resources went up by 92% and ore reserves by 63%. This update supports a mine life of >35 years at 7,200pa of NdPr oxide. Lynas is also building another processing facility in Kalgoorlie, WA for closer proximity to its deposit.

After Kalgoorlie is built the way the operation will work is simple. The raw mixed rare earth concentrate will be mined at the deposit (who would’ve thought?) and then sent to Kalgoorlie to produce a mixed rare earth carbonate (MREC). The MREC churned out at Kalgoorlie will then be sent to Kuantan for further processing before a final product can be sent to the company’s mostly manufacturing customer base.

A pivotal time

We noted that the last update to Mt Weld came mid-last year. That was also the time its Kalgoorlie facility started producing Mixed Rare Earth Carbonate (MREC) in the June 2024 quarter and the first shipment of MREC sent to Malaysia. Ramp up of Kalgoorlie is being managed in step with Mt Weld and Malaysia’s capacity increases.

It also began to reap benefits done during a 6-week shut down of its Malaysia plant in late 2023. These upgrades will allow ~10,500 tonnes per annum for the NdPr family. The reconfigured SX circuit in Malaysia is planned to produce heavy rare earths, i.e. dysprosium and terbium, for the first time in Malaysia (outside China). This is a significant strategic milestone, given global concern about over‑reliance on China for heavy rare earth separation.

In 2025, Lynas raised $750m, done at a 10% discount, but this failed to stop the company rallying to the point where it is 160% higher than the year before. Recording an FY25 profit that was only 10% of the year before ($8m vs $84.5m) failed to dampen enthusiasm either.

We think it is because the world is realising the need for Western-friendly supplies of rare earths given how important they are. But while investors have flocked to stocks like St George (ASX:SGQ) which are aspiring developers, Lynas is an established miner that will benefit faster.

From a corporate perspective, CEO Amanda Lacaze has flagged Lynas is looking at acquiring or partnering with rare earths deposits outside Australia: Brazil was one country mentioned.

We also note Lynas has been pushing for support from the Australian government to build a sulphuric acid plant in WA to ensure a reliable supply of acid needed for its cracking & leaching plant in Kalgoorlie, because previous sources (like acid co‑product from nickel smelting) have become less reliable.

There is attention to licences, particularly in Malaysia: continued permission to import and process rare earths, issues with handling radioactive waste etc. The Malaysian licence was varied to allow cracking & leaching to continue, which is important for Lynas’ operating model.

A lot to like about Lynas, but there are some things to be aware of and to look forward to

Let’s look at some caveats facing the company. The only real caveat from an operational perspective is the fact that a major by-product of the processing at Lynas is radioactive waste, a fact that hasn’t gone unknown to either the locals or politicians in operating region.

It is also continuing to diversify its production process as it grows, this year kicking off building a new facility in Texas as part of a contract to supply the US Department of Defence (DOD) and commercial customers in the states. The facility is currently set to be operational by June 2026 but it has not yet finalised an offtake agreement with the US government. There may well be demand for offtake, but the Trump administration will have the inal word.

There also may be some sort of trans-pacific partnership on the cards in the near future. 2 years ago, Lynas walked away from a mega-merger with MP Materials—the largest critical minerals company in the US—a transaction that would have created a global critical minerals superpower. In fact, the only reason the deal supposedly blew up is because of tanking commodity prices at the moment.

So we shouldn’t speculate too much, but Lynas may be active on the M&A front in the future. At the same time, we’d imagine the company will be more careful and selective about deals it attempts to undertake, given the damage to investor sentiment whenever a deal fails. For the record, we are not singling out Lynas here – this can happen to any stock when a takeover of it or another company it is trying to take over fails, even the best of companies endure this.

What do analysts think

Analysts covering Lynas have a mean price of A$13.12, a hefty discount to the $17 current price. There is a diversity of thought with the lowest of the 14 estimates being $8.90 and the highest $18.90, but even the highest doesn’t suggest that much of an upside. Its FY26 multiples are 32.6x EV/EBITDA and 46x P/E…but its PEG is just 0.16x, albeit because its earnings are expected to return to normal levels after FY25’s 90% drop. Still, analysts expect revenue to double from $556.5m to $1.14bn then to $1.6bn in GY27. And EBITDA from $101.2m to $519.4m in FY26 and to $863.6m in FY27.

Lynas might be a good opportunity, but…

To make a long story short, we think Lynas might be a smart opportunity right now but there could be short-term volatility, even if less than you’d get for a penny stock.

Tread lightly and caveat emperor!